The European Securities and Markets Authority (ESMA) proposed tight restrictions on Monday for crypto companies based outside the European Union that want to directly serve retail investors in the bloc. The guidance aims to limit unfair competition under the EU’s new Markets in Crypto-Assets (MiCA) regulations approved last year.
ESMA said that non-EU crypto firms can only service EU clients if the customer exclusively initiates the transaction, a concept known as “reverse solicitation”. Even then, the exemption should be “very narrowly framed,” ESMA said. Firms cannot rely on reverse solicitation to offer further services later on.
Actual solicitation of EU customers by a non-EU crypto firm, including marketing campaigns, is prohibited under the draft rules open to public feedback until end-April. Regulators also warned they would “actively protect” EU investors and crypto firms from “undue incursions” by non-compliant entities.
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The clampdown aims to pressure foreign companies to establish a physical EU presence and comply with the bloc’s new groundbreaking crypto asset laws that provide unprecedented investor protections in a formerly unregulated sector.
A separate ESMA proposal outlined when a crypto asset could be deemed a “financial instrument” and come under tougher EU securities rules.
